Assume That Souse Agrees to Lease a New Machine from Laird

question 82

Multiple Choice

Assume that Souse agrees to lease a new machine from Laird on January 1,2017,for $40,000 per year,paid in advance (i.e.,at the beginning of the year) .Executory costs are $1,000.The lease term is 11 years and the asset's useful life is 10 years.There is no bargain purchase option.The guaranteed residual value is $10,000.Which statement is correct?

• A) The executor costs will be included in the minimum lease payments.
• B) The guaranteed residual will be excluded in the minimum lease payments.
• C) This is an operating lease because there is no bargain purchase option.
• D) This is a finance lease since the lease term is for most of the economic life of the asset.

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